Changing Your Auditors - Page 3

A reporting issuer must within 30 days after the date of appointment:

1. have the audit committee of its board of directors or its board of directors review the letters from the successor auditor if received by the reporting issuer, and approve the change of auditor notice;
2. file a copy of the reporting package with the regulators;
3. deliver a copy of the reporting package to the successor auditor and to the former auditor; and
4. if there are any reportable events, issue and file a news release disclosing the appointment of the successor auditor and either describing the information in the reporting package or referring to the news release with respect to the resignation or termination of the former auditor.

The Documents

The main documents involved in a change of auditor are set out below.

A change of auditor notice must include certain prescribed information, including:

• whether the former auditor (i) resigned on the former auditor's own initiative or at the reporting issuer's request; (ii) was removed or is proposed to holders of qualified securities to be removed during the former auditor's term of appointment; or (iii) was not reappointed or has not been proposed for reappointment;
• whether the former auditor's report on any of the reporting issuer's financial statements relating to the relevant period contained any reservation and, if so, a description of each reservation; and
• information regarding any disagreement, consultation, or unresolved issuer, each being a “reportable event” (see below).

The reporting package generally consists of:

• the change of auditor notice(s); and
• the letters from the former and successor auditors in respect of their review of the change of auditor notices(s).

A copy of the reporting package and a summary of the contents of the reporting package must be included in the issuer’s next management information circular.

Timeline

A sample timeline setting out the due dates of the documents and deliveries in the case where the termination of the former auditor and the appointment of the successor auditor occur concurrently is set out in Schedule "A".

Reportable Event

The significant event in connection with a change of auditor is a “reportable event”.  This means any disagreement, consultation or unresolved issue between a former auditor and reporting issuer.  These terms are defined under under NI 51-102 and trigger certain disclosure requirements in the change of auditor notice which are set out for ease of reference in Schedule "B".

CNSX Requirements

The Canadian National Stock Exchange does not impose any additional or special requirements on its listed issuers in connection with a change in auditors.

Recent Examples⁵

Three recent examples of a change of auditor and the documents filed in relation thereto and publicly available on SEDAR are for Regal Energy Ltd.⁶, Taiga Building Products Ltd.⁷ and St. Andrew Goldfields Ltd.⁸

Stay Tuned for Part II

Part II of this paper will discuss the auditor’s perspective for a change of auditor including the criteria and processes that a successor auditor will undertake for accepting a new engagement.  These include, for example, knowledge of the client’s business, a review of the former auditor’s working papers and independence issues that may impact on the successor auditor’s ability to accept the engagement.  In other words, even if you want to change auditors, it does not mean that a potential successor auditor may want to change or can accept the engagement.  Part II of this article will be written from an auditor’s perspective by Shane Hilkowitz CA of Zeifmans LLP.

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This article is not intended to provide legal advice as individual situations will differ and should be discussed with a lawyer. For more information contact Brian Koscak or Greg Hogan at Cassels Brock & Blackwell LLP.  Brian and Greg are partners specializing in corporate finance and securities law at Cassels Brock & Blackwell LLP, a full-service law firm located in Toronto, Ontario. Brian can be reached at 416.860.2955 or bkoscak@casselsbrock.com; Greg can be reached at 416.860.6554 or ghogan@casselsbrock.com.

The authors would also like to thank Shane Hilkowitz, CA of Zeifmans LLP for his contribution to this article. Shane can be reached at (416) 256-4000 Ext. 327 or hilkowitzs@zeifmans.ca.

Schedules "A" and "B"